Investing in Gold - Strategies & Opportunities
Investing in gold is now widely talked about in the financial media after the extreme volatility which followed after the coronavirus pandemic.
The trends that are developing right now could have a huge impact on an investor’s portfolio and the methods of investing in gold and silver.
Be sure to keep on reading to learn some of the most important elements to investing in gold this year!
In this article, you will learn:
- The different methods of gold investing via long term, short term and hedging strategies used by institutional investors.
- How to start trading gold commission-free from the Admirals Trade.MT5 account and all of the other game-changing features and analytical tools available to you.
- How to start investing in gold mining stocks and gold ETFs with the Admirals Invest.MT5 account, offering low commissions from just $0.01 on US stocks and ETFs!
- How to test all of the services, features and cutting edge premium analytical tools completely FREE from a demo account!
- And much, much more!
Is Investing in Gold a Good Idea?
A common question among beginner traders is whether investing in gold is a good idea. In fact, nowadays, with so much news around gold, most people are asking the question on whether investing in physical gold, such as gold bars and bullion is better than gold futures investing or gold spot investing.
The answer to these questions will differ for every individual as it depends on what your overall outcome is and the fact there are many different pros and cons of investing in gold. This is because gold is used as an asset for many different types of investors which have very different styles. Let’s take a look at a few examples in the next section.
#1. Long Term Investing Strategies
Gold is often used by long-term investors to balance out an investment portfolio. For example, many fund managers would have a certain allocation to stocks, bonds and metals like gold. The theory behind this is asset diversification.
When one asset isn’t performing well, maybe another asset is. Of course, when it comes to gold price investing, patience is key as, historically, gold has less volatility than the stock market which exhibits more growth-based characteristics.
However, for long-term investing there can be issues when investing in gold bars or investing in gold bullion because of storage costs and insurance costs. When deciding how much gold is a good investment, it can be challenging as gold bullion bars come in fixed sizes which can be quite expensive.
This is why some investors managing a pension portfolio or trying gold IRA investing (Individual Retirement Account), may choose to focus on gold mining stocks or gold ETFs (exchange traded funds). An ETF is a fund that invests into a basket of securities with an aim to track a certain market, region or sector.
Source: Admirals MetaTrader 5, #GLDAR, Monthly - Data range: from 1 Nov 2004 to 30 Mar 2021, accessed on 30 Mar 2021 at 12:30 pm GMT. Please note: Past performance is not a reliable indicator of future results.
The monthly chart above shows the historical price activity of the SPDR (Standard and Poor’s Depositary Receipt) Gold Shares ETF. The SPDR ETFs are a diverse range of different funds that were created and are managed by asset management company State Street Global Advisors.
In the prospectus of the SPDR Gold Shares ETF, it states that its main objective is to “reflect the performance of the price of gold bullion.” It was the first ever US traded gold ETF and was the first ETF listed on a US exchange that is backed by a physical asset - in this case gold bullion.
Did you know that with the Admirals Invest.MT5 account you can invest in stocks and exchange traded funds (ETFs) from 15 of the largest stock exchanges in the world?
With the account you can also access low commissions from just $0.01 on US stocks and you can open an account with just €1, or start with a FREE demo trading account. Learn more and open a live or demo account today by clicking on the banner below:
#2. Short Term Trading Strategies
Some individuals may choose gold spot price investing for shorter-term holding periods. The spot price is the price that gold is currently trading at. Short term traders would typically speculate on the price of gold moving up or down which can be done in a variety of ways, such as gold futures investing.
A futures contract is one of the oldest forms of trading as it was originally designed to help facilitate commercial transactions. Essentially, a futures contract is simply an agreement to buy, or take delivery of a certain commodity at a certain fixed date in the future.
Gold futures contracts are traded through the Chicago Mercantile Exchange (CME) and are used extensively by larger institutions. As futures contracts expire at certain dates, they are used widely by short term traders such as day traders and swing traders for live gold price investing.
With Admirals, you can trade different futures markets via Contracts for Difference (CFDs). This enables you to trade long and short and potentially profit from rising and falling markets. You can also trade using leverage which means you can control a larger position with a small deposit which has its own benefits and risks.
Source: Admirals MetaTrader 5, #GOLD, Monthly - Data range: from 1 Nov 2004 to 30 Mar 2021, accessed on 30 Mar 2021 at 12:30 pm GMT. Please note: Past performance is not a reliable indicator of future results.
The chart above shows the Gold CFD which is available to trade via Admirals. This is effectively the price of Gold vs the US Dollar CFD. When trading via CFDs, traders would enter a long or buy position if they believe the market will rise, or enter a short or sell position if they believe the market will fall.
With a Gold CFD you are merely speculating on the price direction of the market, so you never actually own the underlying asset. For shorter-term day traders who hold their trades for minutes or hours, the speed of entering and exiting the market is essential.
This is also why having the right trading platform is essential. With Admirals, you can trade from the world’s most popular trading platform, MetaTrader 5 where you can access real-time price quotes on more than 3,000+ instruments? You can also trade directly from the platform too!
Click on the banner below to start your FREE download today and test it out for yourself!
#3. Hedging Strategies
Gold is often used as a hedging strategy by larger fund managers. Hedging strategies are used to help offset the losses in an investment portfolio. But there are a variety of ways investors use gold to hedge. Let’s take a look at a few!
Inflation and Gold
Gold is often used as an inflation hedge. This is where a commodity, or security, such as gold, is anticipated to protect against the decreased purchasing power of a currency that arises inflation. In a period of inflation, prices of goods and services generally rise which means each unit of currency will buy you fewer goods and services.
For example, if the US dollar falls because of inflation it means that the price of gold (in US dollars) would become more expensive. Therefore, investors tend to flock towards gold during times of inflation, as they could be rewarded by higher prices in the metal, thus acting an inflation hedge.
Gold as Safe Haven
During times of economic uncertainty, or a stock market crash, many investors prefer to move their capital to gold. This is because the metal is considered a safe haven asset class due to its store of value - it is liquid enough to trade but has a finite supply to make it valuable. Legendary investor, Warren Buffett famously quoted that “gold is a way of going long on fear.”
Source: Admirals MetaTrader 5, #GOLD, Weekly - Data range: from 25 Jun 2017 to 30 Mar 2021, accessed on 30 Mar 2021 at 12:30 pm GMT. Please note: Past performance is not a reliable indicator of future results.
In 2020, there were many investors asking themselves the question: ‘is gold a good investment 2020?’ Some investors may be asking themselves the same question for 2021! However, last year fear in the economy and the stock market was at a high not seen since the 2008 financial crisis.
The vertical dotted line on the chart above shows when the fear of the coronavirus pandemic really took hold of the market, causing investors to rush to the safe haven of gold. The metal went on to rally nearly 50% from the lows of the pandemic in March 2020.
Since August 2020, gold has been on a steady decline as investors moved back into the US dollar in the anticipation all of the government stimulus measures and a new President in the White House would help to revive the battered economy.
If you’re feeling confident to learn more about gold investing, click on the banner to get started today!
How to Start Investing with Admirals
To start investing in gold, just follow the steps below.
- Open your MetaTrader 5 trading platform provided by Admirals or start your free download here.
- From the menu at the top of the platform, select View and Market Watch.
- In this window, right-click and select Symbols. Here you can search from the +3,000 instruments available to trade on via Admiral Markets.
- Once you’ve chosen your instrument, press OK to add it to your Market Watch list. To view a live price chart of the instrument, drag the name from the Market Watch window onto the chart.
- To open a trading ticket, right-click on the chart and select Trading and then New Order. A trading ticket will open up for you to input your own entry, stop loss and take profit levels as well as your position size.
A screenshot showing the MetaTrader 5 trading platform provided by Admirals with a trading ticket open on the chart. 30 March 2021.
Did you know that through the Premium Analytics feature provided by Admirals, you can access the Technical Insight Lookup Indicator? This indicator provides actionable insights and trading ideas across thousands of different markets including gold, gold mining stocks and gold ETFs!
Source: Admirals Premium Analytics, 30 March 2021
The screenshot above shows a search for the commodity GOLD. The Technical Insight Lookup indicator has reported it has found 14 different technical events that are happening on the current price of gold. This is categorised into short-term, intermediate-term and long-term.
The technical events represent key developments within certain technical trading indicators and price action. For example, the screenshot above shows the technical indicator has found events such as a gap down, a moving average cross, a cross of the stochastic, a bearish flag pattern and many more.
What’s even more interesting is the fact it provides a detailed explanation of what the technical event is and why it is important. This is a great tool to help learn more about the different technical indicators and how traders use them to make decisions. There is also a picture so you can visually see the technical event taking place.
Access this game-changing analytical tool today by clicking on the banner below!
Why Invest with Admirals?
- Invest with a well-established company authorised and regulated by the UK Financial Conduct Authority (FCA) and the Cyprus Securities and Exchange Commission (CySEC) and other well-known financial regulators.
- Open an Invest.MT5 investing account to buy stocks, shares and ETFs from 15 of the largest stock exchanges in the world and collect dividend payouts all from the MetaTrader 5 trading platform!
- Open a Trade.MT5 trading account to access more than 3,000+ financial CFDs to potentially profit from rising and falling markets across stocks, ETFs, indices, commodities, currencies and more!
- Receive access to game-changing analytical tools such as the Technical Insight Lookup Indicator from the Premium Analytics section!
Did you know that you can get started today with a FREE demo trading account?
This account allows you to test all of the services and features provided by Admirals in a virtual environment.
This helps to build the skills and confidence to eventually move to a live account.
Get started today with a FREE demo account by clicking on the banner below:
About Admirals (formerly Admiral Markets)
Admirals is a multi-award winning, globally regulated Forex and CFD broker, offering online trading on over 8,000 financial instruments via the world's most popular trading platforms: MetaTrader 4 and MetaTrader 5. Start trading today!
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